Why Wichita’s economy shrank last year while other Kansas cities grew

Wichita’s economy shrank in 2017. It was the only major metro area in Kansas that didn’t grow last year, according to new federal data.

And despite positive growth in some cities, the Kansas economy shrank overall.

Wichita and the state can’t find enough workers, in turn limiting the ability of companies to grow and boost the economy. Across the state, job vacancies increased by 9.1 percent last year.

Local leaders emphasize the need to attract workers to the region. Politicians say the state needs to further promote technical education to supply employees to manufacturers and businesses desperate for employees.

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“We think workforce and talent are really the No. 1 threat to our ability to grow, not only in Wichita but also the state of Kansas,” said Gary Plummer, president and CEO of the Wichita Regional Chamber of Commerce.

Data released by the federal Bureau of Economic Analysis, or BEA, this week shows that the Wichita area gross domestic product — a fundamental measure of the economic strength — declined 1.4 percent in 2017.

Out of 383 metro areas, Wichita ranked 357th in growth. The city was among 71 metro areas that had flat or negative growth in 2017.

Kansas is one of just three states that experienced shrinking economics last year. Its overall, gross domestic product declined 0.1 percent.

The shrinking Wichita GDP is largely attributable to a decline in the city’s finance, insurance, real estate and rental sector, according to data analyzed by Jeremy Hill, director of Wichita State University’s Center for Economic Development and Business Research.

Declines in durable goods manufacturing (things like appliances and machinery), construction and the government sector also contributed.

Andrew Nave, executive vice president of economic development at the Greater Wichita Partnership, said the partnership knows the community has more work to do. He said an update to a key blueprint for economic growth in the region will be finished by the end of the year. The partnership is also seeking a better understanding of how the region can attract workers.

“We have to dig deeper. That’s part of the reason we’re engaged in part of the plans and activities we are now,” Nave said.

Every other Kansas city measured by the BEA experienced increases in GDP in 2017. The Kansas City area (both Kansas and Missouri) was up 1.2 percent. Lawrence increased 1 percent; Manhattan was up 1.8 percent. Topeka had a small bump of 0.2 percent.

James Chung, an economic analyst who has studied Wichita extensively, has drawn attention to Wichita’s out-migration. The city has lost more than 18,000 over the past decade.

But Chung has also reported that Wichita’s perception of itself has improved over the past two years, with 42 percent of residents now saying they want to stay in the city, up from 27 percent in 2016.

Shamrock Trading Corp. has purchased the site of the former French Market at 95th Street and Metcalf Avenue, with plans to create 1,000 jobs over five years.

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Finding, training workers

Wichita leaders emphasize the city — and the state as a whole — need to keep workers and find more.

South-central Kansas had more than 10,000 vacant jobs in 2017, according to the state’s annual job vacancy survey. Statewide, nearly 49,000 jobs were vacant — a 9.1 percent increase from the previous year.

“It’s an economic development issue. If we can’t change the way we do things to be more effective at filling these job opportunities, it’s going to have a long-term impact on our economy,” Plummer said.

Wichita has taken several steps to try combat the worker shortage. Officials say the merger of Wichita State University and Wichita Area Technical College will produce better-qualified workers.

Wichita public schools is also developing an Aviation Pathway curriculum in which high school students will study aircraft production and maintenance in the hope of landing a job after graduating.

“We’re in a national war for talent and we’re all working together collectively to address that both from a retention and recruitment point of view,” Plummer said.

BEA data shows the Wichita area’s total labor force — the number of people employed and those who are unemployed but are actively looking for a job — was 313,716 in July 2018, up 170 people from 313,546 in July 2017.

The number of people without jobs fell 1,434 from July 2017 to July 2018.

What the candidates say

Statewide, the economy has become a defining issue among the major candidates for governor. Each has a plan for improving growth and the winner of the November election could determine whether Kansas provides more funding for education or cuts tax rates.

Republican Secretary of State Kris Kobach wants to cut tax rates. Kansas increased income tax rates in 2017 after years of budget problems following then-Gov. Sam Brownback’s tax cut experiment that began in 2012. Kobach has said the problem with the Brownback cuts was that spending wasn’t cut along with taxes. He has promised spending cuts this time around.

“It’s really bad. We were one of only three states in 2017 that had negative economic growth and the other two were Louisiana and Connecticut. And Louisiana in many respects is a basket case economically and Connecticut is a hyper-regulated place. So for us to be in that company is really bad,” Kobach said at a Tuesday dinner in Wichita hosted by the Kansas Chamber of Commerce.

Democratic Sen. Laura Kelly said Kansas has been through a world of hurt over the past eight years and said the state must reinvest in education and expand Medicaid, which estimates suggest would provide upwards of 150,000 people with health coverage.

“Part of our problem has been our approach to providing for the services that we need to have in the state. When I look at what are the huge economic drivers in this state, number one is education,” Kelly said at the dinner.

Independent Greg Orman said Kansas should be a distribution capital, given its location in the geographic center of the United States. He has also called for streamlining regulations and developing the state’s venture capital community, which can fund new businesses.

Both Kelly and Orman said the state needs to repair its reputation.

“We used to be viewed as a leader. We used to be viewed as an inspiration to other places. Now we’re sort of a cautionary tale, and we’ve got to change that,” Orman said. “We’ve got to get the rest of the country to stop talking about what’s the matter with Kansas and start talking about what’s right about Kansas.”